Google Inc. has long had the reputation of a big spender with its free employee meals, seemingly limitless hiring and an ever-growing portfolio of products.
But with the economy tanking, the Mountain View search engine is slowly scaling back its largesse.
The latest examples came Wednesday, when Google disclosed plans to lay off 100 recruiters. Additionally, the company said it would shutter or stop development of several minor products including a search engine for catalogues and Dodgeball, a social networking service for mobile phones.
"For most of the company's history, they have given their developers and staff a lot of leeway with pet projects and generating new ideas," said Richard Fetyko, an analyst with Merriman Curhan Ford. "Now they're getting to the point where they have to tighten up a bit."
Google's cuts coincide with slowing growth in online advertising, a consequence of a souring economy. Although Google executives have said that search advertising is more resistant to the recession than other kinds of marketing, they acknowledge that their business is not immune.
As a result of the downturn, analysts have revised their forecasts for Google's growth. Instead of revenue increasing 30 percent in 2009, they now expect it to rise 14 percent.
Google will report fourth quarter results on Jan. 22.
As part of its austerity plan, Google cut a significant but undisclosed number of contractors in December. It has also reduced the hours of some cafeterias, slowed hiring and clamped down on travel expenses.
Google has become more aggressive in cutting products that failed to catch on or are redundant. Many analysts have likened the company's strategy to throwing spaghetti at the wall to see what sticks, but until recently, no one bothered to sweep up what fell to the floor.
In November, Google shut down SearchMash, an experimental search engine, followed a month later by Lively, a virtual world that allowed users to create 3-D characters. This week's announcements significantly expanded the list of product cutbacks.
In addition to closing catalog search and Dodgeball, Google said it will stop allowing users to post new clips to Google Video. Development of Google Notebook, for note taking; and microblogging service Jaiku will end.
"Occasionally we have to re-evaluate our efforts and make difficult decisions to be sure we focus on products that make the most sense for our users," said Matt Furman, a Google spokesman.
Relatively little money will be saved from the product housecleaning. But the effort will free up some engineers and other resources.
Google still relies on advertising for 97 percent of its revenue, the vast majority from search engine ads, according to analysts. Initiatives to expand into radio and television and online video advertising remain only minor contributors.
Despite the austerity, Google remains a highly profitable company. During the last three months of 2008, it earned $3.8 billion, setting it apart from the many other companies that are struggling.
Still, Google's stock has tumbled 60 percent from its peak 14 months ago to close Thursday at $298.99.
In recent years, Google's hiring machine has been on overdrive adding new workers, usually hundreds every quarter. But with a workforce of just over 20,000 last year, and the economy in turmoil, executives have recently slowed hiring.
Google cut 100 recruiters, a quarter of its recruiting staff, for that reason. Other than job cuts after acquisitions, analysts couldn't recall another example of Google implementing mass layoffs.
In addition to the job cuts, Google has been consolidating engineering offices, including most recently Austin, Texas; Trondheim, Norway; and Lulea, Sweden. Rather than saving money, executives have said the goal is to create a more effective work environment and that those affected will be offered jobs elsewhere within the company.
Source : http://www.sfgate.com/